Too Many SMEs Not Ready for Auto Enrolment Pensions

The latest research shows a worrying number of UK SMEs are still not ready for the onset of auto enrolment pensions…

With the law changing a few years ago, employers are now required to automatically enrol their employees in a workplace pension scheme if they meet three simple criteria: Workers must work in the UK, earn more than £9,440 a year and be aged between 22 and the state pension age.

Understanding the size of different businesses, staging dates have been introduced where businesses of particular sizes are required to comply with the new law.

The first staging date is the 1st February 2014 for firms with between 249 and 349 employees. Small and Medium-sized Enterprises (SMEs), usually considered to have between 1 and 249 employees, will start to be affected from the 1st April 2014.

Concern from the pension advisory industry is that not enough small and medium-sized firms are either aware or even prepared for the onset of auto enrolment pensions and they are expecting what has been called a "tsunami" of businesses suddenly seeking guidance.

The lack of preparedness is not just a problem for advisors but will obviously cause headaches for the business community as they are expected to struggle to cope with the new regime.

55% of pensions advisers, polled on behalf of NOW:Pensions, said that they believed that there would not be enough advisers to adequately service the expected volume of advice and guidance being sought by SMEs.

“The number of employers that will hit their staging date will increase eightfold this year and the reality is that there aren’t enough advisers to assist them. This, combined with employers leaving auto enrolment to the last minute and providers closing their doors to business should be cause for worry for these companies. What’s more concerning is that a staggering 86% of advisers anticipate that a growing number of pension providers will not offer their auto enrolment schemes to SMEs leaving many with a last minute panic to find a provider.”

Speaking further, explained that the UK’s largest organisations have significant resources, experience in running large pension schemes and the software and systems to be able to do so, something that many smaller businesses do not have:

“Smaller employers don’t have this luxury: they may be setting up pension schemes for the first time, with little experience and their existing payroll systems may not be sufficiently robust to support auto enrolment. Not to mention the fact that there are still employers out there who are completely oblivious to their forthcoming auto enrolment obligations and have no idea what it means for them as a business.”

NOW: Pensions are offering a service for IFAs who log in to their website: upon entering the details of the SMEs they work with, advisers can find help to set up a scheme relatively quickly for their clients.

The Pensions Regulator also offers guidance on workplace pensions including tools for employers to work out their staging date from their P35 and advice on creating an auto enrolment plan for employees.

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